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Concept of "Hundi"

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Vijay

Vijay (Querist)

24 January 2009 Dear Sir,

Please explain the concept of "Hundi" with example.

Thanks
Kanade Vijay

Ram Avtar Singh

Ram Avtar Singh (Expert)

24 January 2009 Hundis
Hundis refer to financial instruments evolved on the Indian sub-continent used in trade and credit transactions. They were used

as remittance instruments (to transfer funds from one place to another),
as credit instruments (to borrow money [IOUs]),
for trade transactions (as bills of exchange).
Technically, a Hundi is an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order. Hundis, being a part of the informal system have no legal status and are not covered under the Negotiable Instruments Act, 1881. Though normally regarded as bills of exchange, they were more often used as equivalents of cheques issued by indigenous bankers.

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